The Illinois Tax Statute of Limitations

The Illinois Income Tax Act provides the Department of Revenue’s statute of limitations allowances.

The Illinois Department of Revenue must comply with the state's statute of limitation laws setting deadlines for tax collection efforts. After the statute of limitations period tolls, or expires, taxpayers may use the tolling as an affirmative defense against collection efforts by the Illinois Department of Revenue. The Department of Revenue may file liens against delinquent taxpayers' properties, seize assets, withhold income wages through income employer withholding orders and revoke professional and business licenses.

Tax Refunds

When a taxpayers overpays her taxes or fails to apply for refunds, she may request a refund from the department within three years from filing her returns or within one year from paying the taxes, llinois allows the taxpayer to use the later of these dates. A taxpayer must file a return to receive a refund, even if she did not have to file a state income tax return.

Notice of Deficiency

In Illinois, the Department of Revenue first sends delinquent taxpayers a first bill or Notice of Deficiency providing taxpayers with a summary of the unpaid tax amount, interest and penalties. The Department of Revenue must generally send a Notice of Deficiency within three years from the date the taxpayer filed state income tax returns. For estates, the limitations period is 18 months after the executor files a request for a prompt liability determination or within three years of filing a return.

Tax Fraud or Failure to File

When a taxpayer fails to file a tax return or commit fraud on his return, the Department of Revenue does not have to comply with a limitations period to assess and collect tax liabilities. For use taxes, Illinois may pursue tax assessments for six years after the return was due. The Illinois Department of Revenue has legal authority to file liens against a taxpayer's personal or real property to satisfy the tax delinquency. Once the department files a lien, the lien is effective for 20 years, and the department may sell the property within this period or simply allow the lien to remain on the taxpayer's financial records, making it virtually impossible to sell or transfer it without requesting a removal from the department.

Voluntary Disclosures

Under Illinois law, a taxpayer may voluntarily disclose his tax liabilities to the Department of Revenue when he fails to file required tax returns. In this case, the Department of Revenue has four years to collect past-due taxes. To receive this benefit of the exception from the general rule allowing the Department of Revenue an unlimited limitations period to pursue tax collection efforts against residents who fail to file their tax returns, the taxpayer must file an application for voluntary disclosure with the Illinois Department of Revenue Board of Appeals.

Considerations

Since tax laws can frequently change, you should not use this information as a substitute for legal or tax advice. Seek advice through a certified accountant or tax attorney licensed to practice law in your jurisdiction.

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